Price Dispute Puts ITA Airways -Lufthansa Deal on Hold

DALLAS — Italy’s Treasury has postponed the sale of a minority stake in the state-owned ITA Airways (AZ) to Lufthansa (LH) due to a disagreement over the agreed-upon price, as reported by two sources familiar with the matter on Tuesday. An Italian source clarified that the Treasury would not “undersell” ITA.

In March, the European Commission informed LH and the Italian Ministry of Economy and Finance that their proposed AZ acquisition could restrict competition on inbound and outbound routes from Italy.

In the statement of objections sent as part of the in-depth investigation of the LH takeover, the EU Commission stated that the transaction might cause customers to face an increase in prices or a decrease in service quality.

Specifically, the Commission thought LH's gradual acquisition of control of AZ could hinder competition at Milan Linate Airport (LIN), the city airport of Lombardy's capital, and on specific routes connecting Italy with Central Europe, North America, and Japan.

However, LH agreed to remedies to obtain EU antitrust approval for the deal, and in July, the German airline group secured the approval to acquire a 41% stake in AZ, a deal, valued at €325 million (US$354 million), aimed at enhancing LH's presence in the lucrative southern European market.

The offer, which included ceding flight slots to competitors, was due to be submitted to the European Commission on Monday but was not sent to Brussels due to the ongoing price dispute.

The dispute. The Italian economy ministry and LH are engaged in a dispute over a difference of €10 million, as confirmed by a second Reuters source. This discrepancy has led to the postponement of the sale. A spokesperson for LH assured the company’s commitment to adhering to the terms of the contract for its investment in AZ.

This is a developing story.

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